Tribe's Kenosha casino bid gets boost from dealmaker

December 11, 2013 10:41 PM

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Florida investor was go-between for Menominee, Hard Rock

Case in point: the Menominee tribe's bid to open a casino in Kenosha, a project that was seen as having little chance of being approved until October, when Hard Rock International stepped forward — with help from Osceola — and became the manager and developer for the proposed $800 million complex.

The proposal is awaiting approval from Gov. Scott Walker, who has the final say on whether it can proceed.

James Allen, Hard Rock chairman, credits Osceola, a former Seminole legislator turned entrepreneur, with bringing the Menominee together with the casino/entertainment company that is owned by Florida's Seminole tribe.

"When I met with (Menominee Chairman) Craig Corn — one of our Seminole leaders, O.B. Osceola, introduced us. I really felt he was somebody that was sincere and wanted to help his nation," said Allen, who is also the chief executive officer of Seminole Gaming.

"It's a feel-good story," Osceola said of the casino proposal, which is anticipated to generate more than $101 million in cash flow for the impoverished Menominee tribe in its fifth year of operation.

"And," Osceola, who owns the Osceola Group of companies, added, "maybe we'll make a few bucks along the way."

The proposed casino complex is expected to generate a total of about $200 million in management and development fees during its first five years of operation. The project is being developed "in conjunction with the Osceola Group," according to the Hard Rock/Menominee project announcement. Osceola said his exact cut and the duties of his company have not yet been determined.

The October entry of the Hard Rock name is seen as one of the key factors in convincing Walker — who insiders had said was preparing to kill the project — to take another look at it.

"When Hard Rock came in, it created a level of excitement that was appealing," said one Republican source with knowledge of the issue, who spoke on condition of anonymity. "Now, they were no longer just talking about gambling. Now, it's about entertainment."

The U.S. Department of Interior approved the Kenosha project in August, and Walker initially said he would decide in October whether to let it proceed. He has since said he may take several months to decide, a delay seen as a severe blow to the the Forest County Potawatomi and Ho-Chunk tribes — the two Wisconsin Indian governments trying to kill the project because they fear it would cut into business at their own lucrative casinos.

The Potawatomi fear a Kenosha casino would slice into the profits at their Milwaukee casino, costing them about $150 million annually. The Ho-Chunk say the Kenosha casino would cost their Wisconsin gambling halls about $20 million annually.

The Menominee and Hard Rock say those figures are exaggerated, and they have offered to reimburse the tribes for any substantiated losses.

Corn said the prestige and financial muscle that Hard Rock brought to the project was vital to Walker's decision to keep the Menominee's hopes alive. "If this was just the Menominee, I highly, highly doubt" Walker would have extended his deadline, Corn said.

The Menominee have been trying to open the massive gambling complex since the late 1990s — when Tommy Thompson was governor, Bill Clinton was president and Apesanahkwat, a tribal politician and Hollywood actor, was the Menominee chairman.

By this spring, as the tribe was anxiously waiting for the U.S. Interior Department to approve its 2004 application to convert the closed Dairyland Greyhound Park into a casino complex, leaders of the cash-strapped tribe were wondering how much longer it could afford to pour money into the plan.

"The Menominee did not have enough money to keep paying the risk capital needed to keep the project going," said Gary Besaw, chairman of the Menominee Kenosha Gaming Authority. "We could not put a lot more money into this because there were too many needs on the reservation,"

Among the tribe's bills was the six-figure monthly cost to maintain its option to buy the defunct track for about $40 million, Besaw said.

Enter Osceola, a 45-year-old Seminole entrepreneur who moves freely between Indian country and corporate America.

"O.B. knows everybody," said Carl Pittman, a Naples insurance broker who briefly was a business partner with Osceola.

Osceola got his start in business working with his father building chickee huts — traditional Seminole housing made of palmetto thatch — throughout Florida, the Caribbean and elsewhere. Today, the chickee huts are largely used for recreation purposes, such as poolside bars or restaurants.

Though his companies are small, with a handful of clients and employees, Osceola thinks big and sees great potential for garnering business in Indian country. Pittman said his venture with Osceola fell apart when he realized Osceola was dreaming of doing more business than Pittman's small insurance agency could handle.

The point was driven home after Pittman attended a meeting with a top financial officials at the Seminole tribe. "They were talking about business premiums of $30 million," Pittman recalled. "We're not that big, and we were told so by the (Seminole) chief financial officer."

When Osceola later decided to work with Wells Fargo Insurance Services Inc., Pittman agreed that Osceola needed the bigger partner.

Osceola said Wells Fargo provides his company with consulting and back office services in putting together insurance and related health services to tribes. Meanwhile, "OB Osceola/Osceola Group insurance has the relationships throughout Indian Country, the cultural understanding of their needs," a Wells Fargo spokeswoman said in an email.

Osceola had a rocky start as an entrepreneur more than 20 years ago when he pitched the Seminole on the idea of building a bingo hall about 40 miles from his hometown of Naples, Fla., and hiring a company owned by him and his father to build and manage the facility. The Osceola company was to be paid 40% of the gambling hall's revenue — the maximum allowed by federal law.

The effort went down in flames when — after the Osceola company spent about $1 million on the nearly completed construction project — the tribe fired the Osceolas, who retaliated by filing an arbitration claim.

The Osceola company was awarded $2.4 million following a bitter court fight. "I wasn't going to be pushed around," Osceola said, adding he now has good relationships with the tribe.

In 2001 he was appointed to the Seminole Tribal Council, a position he held until he resigned in 2011 to focus on being an entrepreneur.

Osceola has the money to pursue business ventures because members of the Florida Seminole tribe receive casino dividends of about $10,000 a month. In addition, he said, he was paid about $150,000 annually during his decade as a member of the Seminole Tribal Council.

In 2010, he launched a construction company in partnership with a national construction company in Ohio. That company became part of the Osceola Group, a quartet of start-ups that includes a development company, an insurance brokerage and a 51% stake in a marketing company. In addition, Osceola is part owner of a NASCAR racing team.

"I love being the owner, building relations and harvesting business and then I have my day-to-day guys grind it out," Osceola said.

Osceola also has strong ties to Hard Rock and Allen, the company chairman. Osceola Group Marketing is vying for a $13 million, three-year contract with Seminole Gaming. In addition, Osceola's Pro Spirits is partnering with Hard Rock to co-manage the Hard Rock Vodka label. The Seminole tribe bought Hard Rock in 2007 for about $1 billion while Osceola was in the legislature.

In April, when Besaw, the Menominee gaming chairman, was in Phoenix for the National Indian Gaming Association conference, he approached Osceola after being told that he had connections that could keep the Menominee casino project on track.

Coincidentally, Bruce Pecore, a former Menominee legislator, had approached Osceola the day before Besaw did. Pecore is now a consultant for Osceola on the casino project.

The pitches from Besaw and Pecore intrigued Osceola enough that he traveled from his Florida home in June to tour Dairyland.

"I saw it as a great opportunity, and the site was fantastic," Osceola said, noting how a casino there could tap the Chicago area as well as the Wisconsin market. Hard Rock projects the casino would win about $480 million annually from gamblers by its fifth year of operation — making it the biggest casino in Wisconsin or Illinois.

By July, Osceola was pitching a proposal to Allen, including a preliminary feasibility study.

In early September, the Menominee began serious talks with Hard Rock, culminating with a letter of agreement on Oct. 1, said Michael Beightol, a spokesman for the casino project.

Because the Menominee and Hard Rock were rushing to meet Walker's Oct. 22 deadline to submit proof that the casino project met the governor's criteria for approval, there are still many details that need to be finalized. For example, Hard Rock and the Menominee have not yet signed a final detailed management contract.

Hard Rock is a $3.8 billion company that has its name on 175 venues — including cafes, hotels and seven casinos — in 54 countries, and the company said it manages 67 of those venues. It currently manages only one Hard Rock casino, a modest-sized facility in the Dominican Republic, and is a 20% owner and will manage a casino opening next week in Ohio, the company and Ohio gaming regulators said.

The Seminole tribe owns and operates two Hard Rock casinos in Florida and the tribe's five other casinos in the state; overall, the tribe's Florida operations bring in about $2.1 billion in gaming revenue annually.

Hard Rock used its well-known name and financial muscle to win over the Menominee. Hard Rock also was the only suitor that brought money to the table; the amount has not been disclosed.

"We needed that risk capital — it showed that they believe in us and in the project," Besaw said, noting that by doing so Hard Rock is gambling a bit, because if Walker vetoes the project, "that money is lost."

Osceola sees the project as a job creator that will help pull the Menominee out of poverty, just as casino gambling did for his own Seminole tribe.

And down the road, there are other Osceola companies that may get more slices of the pie. He expects his construction company, which he said has done a couple of $10 million-plus projects, will help build the facility. In addition, his other companies could get involved.